Due to limited income sources after retirement, opting for a retirement plan in your early years can be beneficial later. Retirement planning allows you to create a revenue source to meet your lifestyle expenses during your retirement years. The following are different types of retirement plans you can consider to ensure a worry-free retirement.
Types of retirement plans
The following are some of the best investment plans you can consider for your retirement planning:
Insurance-based retirement plans
You can get insurance-based plans from insurance providers. Also known as pension plans, such plans may typically offer both, death benefits and retirement benefits, and are further categorised into the following:
- Immediate annuity plan
In this type of annuity plan, you must make a lumpsum investment. You will start to receive the annuity in your account immediately.
- Deferred annuity plan
For deferred annuity plans, you make a lumpsum investment or pay premiums at regular intervals, however, you will receive the annuity after a certain specific period determined by the insurance provider.
- Pension plans with cover
As the name suggests, these plans offer retirement benefits along with life cover.
- Pension plans without cover
These plans simply offer only retirement benefits. They do not offer death benefit.
- Unit Linked Insurance Plans (ULIPs)
ULIPs are a combination of investment and life cover. The insurer allocates a portion of your premium to life cover and the remainder to investments across equity, debt or balanced funds. ULIPs come with a 5-year lock-in period, after which you can withdraw them partially.
Employment-based retirement plans
As an employee of a company, your company may set up a retirement plan for you. Under the Employee Provident Fund (EPF), you and your employer contribute a certain amount of your salary towards a fund. Your employer opens an EPF on your behalf and you receive a Universal Account Number (UAN) which remains the same throughout your lifetime. You will be eligible for pension once you attain 58 years of age.
Government-backed retirement plans
The government also regulates certain retirement plans. Listed below are a few:
- National Pension Scheme (NPS)
NPS is a voluntary, defined contribution retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). With NPS, you can choose from multiple investment options to invest your money in, with investments in fixed-income instruments, government securities, equity market instruments, etc. Once you attain 60 years of age, you can withdraw the accumulated funds as a lumpsum amount and annuity.
- Public Provident Fund (PPF)
You can consider PPF in your retirement planning due to its long-term maturity of 15 years. If you opt for PPF, you must deposit a minimum and maximum of Rs 500 and Rs 1.5 lakh per financial year, respectively. You can withdraw funds before maturity under certain conditions.
- Senior Citizens Savings Scheme (SCSS)
The government also offers savings schemes for retired individuals with attractive interest rates. As an individual above 60 years of age, you can deposit up to Rs 30 lakh in a SCSS with a 5-year maturity period.
- Monthly Income Scheme (MIS)
With MIS, you can deposit up to Rs 9 lakh in a single account and Rs 15 lakh in a joint account and earn monthly interest on the deposits. Due to the monthly interest offering, you can opt for MIS as your income source after retirement.
Bottom line
You should be able to live a comfortable life after you retire. Since not all companies provide pension, it is up to you to employ strategies to help with your retirement planning.
